Combatting Illicit Financial Flows in Mozambique: The Role of Tax Transparency Reforms

Illicit financial flows (IFFs) pose a critical threat to fiscal sustainability and development in many low-income countries, including Mozambique. Characterized by tax evasion, trade misinvoicing, offshore transfers, and corruption, IFFs have led to significant public revenue losses, particularly in the extractive sector. According to recent estimates, Mozambique loses approximately US$1.4 billion annually to these flows—undermining investments in health, education, and infrastructure. In response, the government has introduced a range of fiscal transparency reforms, including the digitalization of tax systems, creation of specialized tax units, and adherence to international standards such as the Extractive Industries Transparency Initiative (EITI). However, the effectiveness of these measures remains uncertain. This study aims to assess the extent to which fiscal transparency reforms have contributed to combating IFFs in Mozambique. Using a mixed-methods approach, the research integrates qualitative data from policy documents and interviews with key stakeholders, along with descriptive statistical analysis of revenue and compliance trends. The findings indicate modest progress in improving transparency and revenue mobilization, particularly through digital platforms and increased reporting requirements. Nevertheless, structural and institutional challenges—such as limited legal enforcement, weak coordination among oversight bodies, and the absence of a beneficial ownership registry—continue to hinder reform impact. The study concludes that while fiscal transparency initiatives are necessary, they are insufficient in isolation. A more comprehensive strategy is required—one that includes legal reforms, technological investment, capacity building, and stronger citizen engagement. The article provides policy recommendations to address these gaps and contributes to the broader debate on how developing economies can mobilize domestic resources by curbing illicit financial flows and promoting accountable fiscal governance.